Inside the Phillies: Phils swinging for fences with next TV deal

Huge TV contracts are now common in baseball, which gives the Fightin's more leverage with Comcast.

Posted: February 14, 2012

It was called Philadelphia Regional In-Home Sports & Movies, and it was ahead of its time. The Phillies started televising their games on Prism in 1977, long before regional cable sports networks funded massive spending sprees in baseball - as in this postseason.

The Texas Rangers and Los Angeles Angels have spent lavishly on free agents because of TV contracts that total approximately $4.6 billion. In Philadelphia, the Phillies have made good money dating back to Prism, the original joint-venture operation with Comcast SportsNet, and subsequent rights deal.

They can do much better.

"We will see," David Montgomery said recently. "Right now, we're enjoying tremendous popularity. We would hope our friends at Comcast would see that as well. I'm sure they will."

The present deal with Comcast ends in 2015.

The Phillies' president smirked, a rare moment of candor for the public face of a silent ownership group that has it all going right now. Many in this region have spent significant money supporting the Phillies - whether it is in tickets, merchandise, or their valuable time. The Phillies have sold out 204 straight games, boast the highest local ratings in baseball, and sell substantial amounts of merchandise.

So it's natural to wonder: Where does all the revenue go?

Well, the Phillies have a higher payroll than any team in the National League and only the Yankees and Red Sox eclipse them. Granted, we are still left with an incomplete picture, about as complete as a professional sports franchise wants to offer.

Once you have everything, you want even more. Most of baseball has found money from TV deals as another way to prosper.

"They're getting a lot of play," Montgomery said.

And rightfully so: The next TV deal, whenever it is signed, will be a monumental day in the franchise's history.

The Phillies, according to Forbes magazine, netted some $24 million from their TV rights contracts with Comcast and PHL17 during the 2010 season. It's important to note the Phillies also profit from TV advertising sales, which they still handle in-house, to avoid sponsor conflicts in ballpark signage. The amount the Phillies earn from those sales is unknown, but in any future mega-deal, the Phillies could choose to cede the revenue from TV ad sales to Comcast or another broadcaster, if the price is right.

Still, the total payout of TV contract and ad revenue rights will dwarf whatever the Phillies earn under the current deal.

San Diego is the 26th largest market in baseball. Their 2011 local TV ratings were 3.15, or about a third of the Phillies' 9.12 number. And the Padres are reportedly on the verge of signing a 20-year deal with Fox Sports possibly worth as much as $1.5 billion. (This number, reported by USA Today, has been disputed. But it could include the value of an equity stake in the network.)

In Houston, the Astros will earn an average of $80 million a year beginning in 2013 through a joint-venture operation with Comcast, according to the New York Times. The Astros had baseball's worst local ratings in 2011.

The Angels lured Albert Pujols and C.J. Wilson on the strength of a $3 billion TV rights deal signed with Fox Sports West. That agreement was reached despite the Angels posting baseball's fourth-worst local TV ratings in 2011.

Ownership for the other team in Los Angeles, the financially challenged Dodgers, is up for auction. But bidders are also vying for the value of the team's next TV deal, which can begin in 2014.

"You can spend $1.5 billion now to get the team," Scott Boras told USA Today last week, "but a month later, you're going to get $4 billion or $5 billion or more for the regional sports network."

And then Boras predicted the Phillies could land a deal even larger than that of the Dodgers.

For nine straight seasons, the Phillies' local ratings have risen. Over that period, the growth is 176 percent, according to Sports Business Daily. In San Diego, where the Padres are about to profit, the local ratings decreased 41 percent from 2010 to 2011.

So, yes, we are talking about a possible $5 billion dollar infusion beginning in 2016. And by then, who knows what sort of premium price is being placed on live sports on TV?

Why are the rights worth so much? Television executives and advertisers are discovering that live sports are the only content immune to the digital video recorder (DVR) culture. Any other program can be recorded and viewed later - either online or via DVR - without the commercials. But sports are still best viewed live, even if it means sitting through the commercials.

The Phillies may not have to wait until 2016 to cash in. Comcast, in a show of good faith, could rip up the final few seasons of the existing 15-year contract. That would deter any other possible bidders and eliminate the outside chance of the Phillies creating their own network.

Or the Phillies could simply decide it's worth waiting and budget with the knowledge the money will eventually come. Let the Dodgers negotiate a new market-setting deal that the Phillies can surpass in 2016.

Regardless, despite a possible deal being four years away, that sort of money can drive decision-making now. And while it's nearly impossible for Phillies fans to criticize the once-frugal team's meteoric rise in payroll spending, the overwhelming public sentiment will side with Cole Hamels in upcoming contract negotiations.